Mining

The former-producing Steenkampskraal Mine is located approximately 70 kilometers north of the town of Vanrhynsdorp in the Western Cape Province of South Africa and approximately 350 kilometers north of Cape Town. The mine is held by Steenkampskraal Monazite Mine (Pty) Limited ("SMM"), a 74%-owned subsidiary of Rare Earth Extraction Co. Ltd. ("Rareco") of Stellenbosch, South Africa. Rareco is a 100%-owned subsidiary of GWMG.

As a result of being in operation previously, the infrastructure at, and around, the mine site is excellent with access to the site by paved and gravel roads. It is also in close proximity to rail and sea-port. In addition, access to power will be provided through the extension of the existing electrical grid to the site. Diesel generators will be used for backup power.

The South African government as well as the Western Cape and local municipal governments have proven, throughout all discussions and negotiations, to be pro-development. Despite a number of media headlines that hint at the potential for disruptions to the favourable nature of the political climate, all interaction between GWMG and the national and regional governments has been very positive in nature.

In the course of putting the Steenkampskraal mine into production, GMWG will be engaged in remediation of the minesite, cleaning up contamination left from the period when Steenkampskraal was operated as a monazite mining operation, producing monazite concentrate which was then shipped elsewhere mainly for thorium recovery.

In June 2010, SMM was awarded a Converted Mining Right permitting mining operations for a 20-year period. Also of significance is the Nuclear Authorization held by the Steenkampskraal site for the handling of radioactive material including the storage of thorium. This is, to best of GWMG management’s knowledge, unique in South Africa. The ability to store thorium in casements, back underground in a recoverable form, will be of clear benefit in dealing with the thorium as it is removed in the processing stage at site. GWMG plans to investigate the potential to access monazite from tailings of other types of mining operations. The monazite could be processed at Steenkampskraal with the thorium inherent in these types of tailings stored at the Steenkampskraal site. The companies from which the tailings will be obtained have, in the opinion of GWMG management, no other available alternatives for such storage. This could create a compelling reason for them to enter into an agreement with GWMG for the processing of their monazite, hereby potentially creates access to additional monazite supply for GWMG.increasing rare earth production at Steenkampskraal.
 

Location Map

Historical Results

The Steenkampskraal mine originally operated through a subsidiary company of Anglo American Corporation from 1952 to 1963, making a monazite concentrate that was sold mostly for its thorium content. However, Steenkampskraal monazite was also processed in the US, producing the full suite of rare earth elements, including heavy rare earth products. In 1989, Rareco acquired the mine with the intention of becoming a rare earth elements producer. However, the fundamentals for the REE sector deteriorated significantly during that time, as China took control of the global rare earth industry, and mining became less attractive than in the current environment. Therefore, the operation was put on hold until recently.

Independent review of the project was conducted by Dr Felix Mendelsohn in 1996, at the request of Rareco. These independent resource estimates indicate a recoverable resource of approximately 30,000 tonnes TREO, including rock already broken in underground stopes, and stockpiled on surface, as outlined in the table below.

It is important to note that the independently developed data does not represent an NI-43-101 compliant reserve or resource. As such, a Qualified Person has not done sufficient work to establish any mineral resource, and this data should not be relied upon to assume any NI-43-101 compliant reserve or resource. GWMG is treating this data as a guideline only for developing the work programs necessary to bring results into compliance with NI 43-101.

Historic underground mining operations deposited run-of-mine waste rock on the surface of the property in addition to tailings from the processing plant. Sample grades of the tailings and waste rock indicate that historically both would qualify as resource tonnages for rare earth production. In addition to the remaining in-situ material, is rock that was blasted but not hauled to surface. Some of this rock was historically considered as low grade material and was used as ballast for the underground railroad track used to support the mined rock being hauled to surface.

Another positive attribute of a mining operation at Steenkampskraal, is that the thorium content (with an historic in-situ grade of 2.5%. note: not NI 43-101-compliant)  may provide an attractive byproduct from the operation. Rareco has received expressions of interest from third parties in recovering the thorium from the operation. Using existing proven technology, Rareco believes that it can extract the thorium during the production of the final mixed rare earth chloride concentrate to meet any customer and environmental requirements. According to current plans, the extracted thorium will be mixed with concrete and stored in designated areas within the underground mine. The thorium can then potentially be recovered through an acid digestion process if, as and when required.

Steenkampskraal Update:

GWMG, through its wholly owned subsidiary Rareco, has focused its attention on the refurbishment and the planned re-commissioning of the Steenkampskraal mining operation. A series of development steps have begun to transform this brownfield project toward full operations with a projected launch in the first quarter of 2013.
In April 2011, GWMG announced its “fast track” program that included the following components:

• The commencement of the refurbishment process, the re-establishment of the containment ponds, and addressing all waste disposal requirements.
• A tender call for the refurbishment work to commence immediately after the Company confirmed receipt of approval of the proposed work program from the National Nuclear Regulator of South Africa (“NNR”) under the site’s existing Nuclear License.
• Surface and underground sampling at Steenkampskraal to begin the process of bringing the historic resource estimate into compliance with National Instrument 43-101 technical reporting requirements.
• The continuation of advanced discussions with potential partners regarding a Rare Earth separation plant.
• The evaluation of whether a feasibility study is necessary to meet financing requirements.
• The continuation of work necessary to complete the Environmental Management and Protection Plan and other environmental regulatory requirements.

At that time, GWMG announced that the design of the mine and processing facilities had been upgraded to allow for capacity to produce approximately 12,000 tonnes per annum of Rare Earth chloride solutions. These are to be sent to the solvent extraction separation facility, planned to be located in the Steenkampskraal region, to produce approximately 5,000 tonnes of Rare Earth oxides per year. This planned level of production is almost double the 2,700 tonnes per year capacity originally anticipated.

Later in April 2011, GWMG announced the appointment of Vincent Mora as the Company's Project Development Manager for the Steenkampskraal Rare Earths operation in South Africa. His primary responsibility is to expeditiously plan, budget, coordinate, and direct activities concerned with the development of the feasibility study, detailed engineering, construction, and operation of the mine.

In May 2011, the Company received full approval for its work program, under the existing Nuclear Authorization for the Company's Steenkampskraal Rare Earths project from the South African National Nuclear Regulator. The approvals cover programs that include radiation protection, integrated waste management (including the long-term storage of radioactive material), and the transportation of radioactive material.

As of May 2011 GWMG exercised its rights under South African company law to initiate the process to compel the acquisition of all of the remaining shares of Rareco. At this stage, GWMG held 93.1% of the issued and outstanding shares of Rareco. GWMG had, since September of 2010 when it acquired 20.8% of the Rareco shares, intended to acquire all of the outstanding shares of Rareco.

In June 2011, GWMG selected East Rand Engineering Services to carry out the shaft refurbishment project at Steenkampskraal. The refurbishment was scheduled to begin within two weeks, which it did. Included was the refurbishment of the mine access decline, construction of winding gear, and installation of dewatering pumps at the 3½-level and the refurbishment of the ore bin. Additionally, all infrastructure services were to be installed throughout the underground mine area.

Also in June 2011, the Company appointed Witker Zimba as the Solvent Extraction Plant Superintendent with primary responsibilities that included the development and operation of GWMG’s Sx plant. As well, Thabo Khoboko was appointed to the position of Plant Metallurgist with responsibility for the operation of the Rare Earth processing plant at Steenkampskraal including crushing through to Rare Earth chloride production.

By July 2011, GWMG had initiated and completed the exercise of its rights to compel the acquisition of the remaining shares of Rareco that it did not already hold under Section 440K of the Companies Act (South Africa). GWMG had acquired the requisite 90% of Rareco shares which entitled it to initiate the compulsory acquisition provisions.

July 2011 also saw the announcement of a groundbreaking Heads of Terms with Ganzhou Qiandong Rare Earth Group Ltd. ("GQD") of China to build a Rare Earth separation plant in proximity to GWMG’s Steenkampskraal operation. A new joint venture company, Great Western GQD Rare Earth Materials Co. Ltd., will be created in which GWMG will hold 75% ownership while GQD will hold the remaining 25%. It is anticipated that the separation plant will be fed with Rare Earth chloride that GWMG produces at Steenkampskraal and/or with feedstock from sources in the region.

Two days later, GWMG announced that it had contracted DRA Mineral Projects (Pty) Ltd. of South Africa, a company with a strong track record of utilizing world class standards, for the detailed design of the Steenkampskraal processing plant. The processing plant, as the first step in the production process in which Rare Earth ore is converted into Rare Earth chlorides, will be located at the Steenkampskraal mine site. The plant detailed design project is expected to be completed by December 2011.

To further round out the expertise of the Steenkampskraal team, GWMG appointed John Selby as a monazite / radiation / environmental consultant. Mr. Selby was most recently with Richards Bay Minerals of South Africa. He will advise on the processing of additional monazite streams to be used as feedstock in GWMG's rare earth processing and separation facilities in and around Steenkampskraal. In addition, given Mr. Selby’s internationally recognized expertise in radiation and environmental work, he will also provide expertise to the Company in those areas.

Concurrently, the Company appointed Brent Jellicoe to the position of Director of International Exploration. His primary responsibility is to manage the exploration program at GWMG's Steenkampskraal rare earth project in South Africa. In addition, he has been assigned to locate and evaluate new rare earth projects on a global basis.

In September 2011, GWMG announced the selection of Drillcorp Africa (Pty) Ltd. as the drill contractor for the upcoming exploration and resource evaluation program at the Steenkampskraal site. The first objective of the program is to provide geological information, metallurgical characterization, and assay data in support of a fully compliant National Instrument 43-101 ("NI 43-101") resource estimate report on potential ore material stockpiled at surface as well as underground in-situ material. The second objective is to expand the resources at Steenkampskraal through testing the down-dip extension of the main structure as well as full investigation of the encasing host rock mineralization.

In a September 2011 Corporate Update, GWMG set out the following immediate-term project execution steps. The target for the following steps is by, or about, the end of 2012:

• Enter into a joint venture agreement with GQD relating to the design, construction, commissioning, training and operations of a Separation Plant that will be located in the Steenkampskraal region.
• Initiate collection of representative mini-bulk samples for metallurgical characterization of the surface rock dumps, tailings dams, and areas of known underground mineralization.
• Launch sampling programs to collect material for assay and geological information from the surface rock dumps, tailings dams, and areas of known underground mineralization that will contribute to an NI 43-101 compliant Resource Estimate.
• Start underground mapping of geological structures and in-situ mineralization plus channel sampling to supplement recent drill hole and historical information that will contribute to an NI 43-101 compliant Resource Estimate.
• SRK is to renew the 3D geological model with new information from evaluation programs and compile the report framework that will contribute to the Resource Estimate Report.
• Complete refurbishment of the mineshaft and associated facilities required for mining operations.
• Complete field acquisition of technical data that will be included in the upcoming NI 43-101 Resource Estimate.
• Complete the concentrator component of the design work for the Chloride Processing Plant which is to be located at the Steenkampskraal mine site.

In late September 2011, the Company provided an update on negotiations with GQD, stating that substantial progress was being achieved in discussions regarding the separation plant. At that time, GQD was to send a team of six engineers to South Africa to continue detailed discussions with GWMG personnel on the design and construction of the separation plant. As well, GWMG was to be represented by two Company Directors, the Chairman of Rare Earth Extraction Co. Ltd., the Steenkampskraal Project Director, and GWMG’s metallurgical and technical staff.

In early November 2011, GWMG announced the appointment of David Kennedy to the position of Chief Executive Officer of GWMG’s 100%-owned subsidiary Rareco. Mr. Kennedy, a co-founder of Less Common Metals in 1992, has served as GWMG’s Managing Director, Metals and Alloys, since the Company acquired LCM in 2008. In his role as CEO of Rareco, Mr. Kennedy, who remains a Director of GWMG, will have overall responsibility for the development, commissioning and operation of GWMG's Steenkampskraal rare earth mining operation.